July 11, 1988

Appeal of

GARY A. BOYD

Under Contract No. HCR 54571

PSBCA No. 2192

APPEARANCE FOR APPELLANT:

William W. Anderson, Esq.

APPEARANCE FOR RESPONDENT:

Gladys N. Bryer, Esq.

OPINION OF THE BOARD

This appeal is from a contracting officer’s decision terminating Appellant’s highway transportation contract for default based on a failure to provide certification of insurance covering vehicles under the contract. The parties have elected to submit the appeal on the record pursuant to 39 C.F.R. § 955.12.

FINDINGS OF FACT

1. Gary A. Boyd, Appellant, ad Respondent, United States Postal Service, executed a transportation services renewal contract dated June 12, 1984, under which Appellant would continue to provide box service to postal customers along a specified route between Mantiowish Waters, Wisconsin (WI) and Mercer, WI. The term of the renewal contract was July 1, 1984, to June 30, 1988, and the annual rate was $15,923. Appellant had previously held the contract for the term July 1, 1982, to June 30, 1984. (Appeal File (AF) Tab A 1-5; Affdvt. Gary Boyd, Mar. 30, 1988, ¶ 2).

2. Appellant was required to furnish one truck or van providing a minimum capacity of 250 cubic feet, the vehicle to be capable of being fully enclosed, weatherproofed, and equipped with secure locking devices (AF Tab A 4).

3. Incorporated into the contract was PS Form 7407, Oct. 1981, as amended, Basic Surface Transportation Services Contract General Provisions (GP) (AF Tab A 8-21). Clause 6 of the GP set forth insurance requirements along with minimum coverage limits for all motor vehicles to be used under the contract (AF Tab A 11-12). The clause provided as follows:

“Insurance Requirements.—If the contract requires the operation of a motor vehicle on the highway, the successful bidder or offeror will be required to establish that there is an insurance policy in effect covering all motor vehicles to be used under the contract, providing, as a minimum, the following types of coverage:

(1) Limit for bodily injuries to or death of one person: $10,000.00

(2) Limit for bodily injuries to or death of all persons injured or killed in any one accident: $20,000.00

(3) Limit for loss or damage in any one accident to property of others (other than mail); $5,000.00

If greater minimums are required by State or Federal laws, those minimums shall apply in place of the foregoing.

The maintenance of insurance coverage complying with the above restrictions shall be a continuing obligation of the contract, and the lapse or termination of insurance coverage without replacement coverage being obtained shall be grounds for termination of the contractor’s right to perform under the contract.

The contractor shall notify the contracting officer of any lapse in insurance coverage as far in advance of the beginning date of such lapse as possible.”

Clause 16 of the GP authorized the Contracting Officer to terminate the contract for default when the public interest so required, and provided that if it were later determined that the contractor was not in default, or that the default was excusable, the termination would be converted to one for convenience, which was provided for in Clause 17 of the GP (AF Tab A 15-16). Pursuant to Clause 17, “Termination for Convenience,” a contractor would be allowed as an indemnity the liquidated damages amount specified in Clause 12 (c) (AF Tab A 14, 16).

4. The specifications included a provision captioned “Insurance Requirements,” which referred the contractor to the requirement in the General Provisions (PS Form 7407) for insurance coverage, and stated that the contractor was required to complete a Certification of Insurance, PS Form 5420, within 15 days after renewal of the contract (AF Tab A 6).

5. Appellant did not submit the insurance certification within 15 days after the renewal as required in the specifications (see Finding 4, supra). None of Respondent’s officials brought the omission to Appellant’s attention for the first three years of the renewal contract.

6. The Appeal File contains a copy of a letter dated July 20, 1987, from the Contracting Officer to Appellant (Certified No. P 604 883 881), notifying Appellant that a current PS Form 5420, Certification of Insurance, was required for his contract and had not been furnished. The Contracting Officer stated in the letter that copies of black PS Forms 5420 were enclosed and requested that Appellant have his insurance agent complete one and send it to the Contracting Officer’s office at the Chicago TMSC (Transportation Management Service Center) within five days of receipt of the letter. The letter also included a statement that failure to provide a completed certification within the prescribed period could result in termination of the contract. (AF Tab C 38).

7. Appellant denies receiving the letter dated July 20, 1987 (Affdvt. Boyd ¶ 5; Complaint ¶ 3). Although signing for the certified communication on July 25, 1987, Appellant asserts that only the Form 5420 was inside the envelope (id.; AF Tab C 39). Based on the sworn statements of Appellant, we find that Appellant did not receive the letter dated July 20, 1987.

8. On August 15, 1987, Appellant’s son delivered a Form 5420 to Appellant’s insurance agent so that it could be completed and mailed to the Chicago TMSC (Complaint ¶ 4).

9. Michael J. Mason, one of Respondent’s officials at the Chicago TMSC, in a telephone conversation with Appellant on August 21, 1987, inquired about the requested insurance certificate, and was told by Appellant that he had sent it to his insurance agent but they were slow in getting things done (AF Tab C 40). During that conversation Mr. Mason referred t the five day deadline in returning the form, but there was no mention by Appellant that he had not received the letter of July 20, 1987 (Affdvt. Michael J. Mason, Mar. 28, 1988). Appellant thereafter contacted the office of his insurance agent and was told on August 24, 1987, that the matter was being handled (Complaint ¶ 5).

10. In a letter dated August 21, 1987 (Certified No. P 484 537 018) to Appellant, the Contracting Officer stated that Appellant had been contacted on two previous occasions about the lack of the insurance certification, and that unless a PS Form 5420, Certification of Insurance, for Highway Contract Route 54571 was received by the close of business August 25, 1987, the contract would be terminated for default (AF Tab C 41). August 21, 1987, fell on a Friday; August 25, 1987, on a Tuesday. Appellant received the letter on August 25, 1987 (Complaint ¶ 6).

11. On August 25, 1987, Appellant received another telephone call from Mr. Mason who inquired whether Appellant had received the letter dated August 21, 1987. Appellant replied that he had just received it that morning, and in the ensuing conversation stated that he had the required insurance in effect and had sent the form to his insurance agent for completion and mailing to the TMSC (Complaint ¶ 7).

12. On August 26, 1987, another telephone call was made to Appellant who was informed by the Contracting Officer that his contract was going to be terminated as of the close of business August 26, 1987 (Complaint ¶ 8).

13. There is no evidence that the Contracting Officer or his representatives attempted to verify Appellant’s claim of being insured by contacting Appellant’s insurance agent.

14. In a final decision of the Contracting Officer dated August 28, 1987, Appellant was advised of the decision to terminate the contract effective the close of business August 26, 1987, in accordance with GP Clause 6 (AF Tab B 36).

15. On August 31, 1987, a properly executed PS Form 5420 for Appellant from the Leitch Agency in Mercer, WI dated August 27, 1987, was received in the Chicago TMSC (AF Tab 42). Insurance coverage had been in place for Appellant through the Ponik-Leitch Agency since February 1, 1987 (Complaint, Exh. D).

16. Appellant has submitted copies of certificates evidencing proper insurance coverage during the initial contract and throughout the term of the renewal contract except for the period May 3, 1986, through February 1, 1987. With respect to that period Appellant states he was unable to obtain a copy of the relevant insurance certificate, but nevertheless, “at all times pertinent to the original contract term and renewal term thereof, he had adequate insurance coverage in accordance with the terms of his contract.” (Affdvt. Boyd ¶¶ 3, 4, Exh. A; Affdvt. Peter L. Mutuszak, Apr. 13, 1988, Exh. A(2)).

17. An appeal from the final decision was filed with the Board.

DECISION

The issue in this appeal concerns the propriety of the Contracting Officer’s decision to terminate Appellant’s contract for default because evidence of required insurance had not been timely provided.

Where insurance is a requirement of a contract and a contractor fails to obtain such, a default termination will be upheld. E.G., UMM, Inc., ENGBCA No. 5330, 87-2 BCA ¶ 19,893; Christina Corp., PSBCA No. 762 (Dec. 24, 1980). However, before terminating a contract for default, the Contracting Officer would be expected to give the contractor notice of the deficiency and the opportunity to supply evidence of insurance. See UMM, Inc.; Shamrock Industrial Maintenance, DOTCAB No. 72-11, 72-2 BCA ¶ 9482.

Here Respondent waited over three years before it sought from Appellant the certification of insurance, indicating that the time for submission (stipulated in the contract as 15 days after the renewal date) was no longer of the essence. After its waiver of the due date, when the requirement was reimposed, Respondent was required to allow Appellant a reasonable period of time to comply. Cf. Jack Yanks, PSBCA Nos. 163, 164, 76-1 BCA ¶ 11,782.

The record establishes that Appellant did not receive the Contracting Officer’s first letter directing submission of the required insurance form within five days from receipt of the letter. although he did receive the insurance form and thereafter forwarded it to his insurance agent. When the form was not promptly filed with the Contracting Officer, telephone calls were placed to Appellant who stated that proper insurance was in effect and this his insurance agent was in the process of completing the form and mailing it in. Despite this information the Contracting Officer in a subsequent letter to Appellant required submission of the insurance form within a five-day period which expired on the date Appellant received the letter.

Under the circumstances we conclude that after Respondent waived the original due date, Appellant was not provided a reasonable period of time to supply the insurance certification. Accordingly, there was not a proper basis for issuing the default termination, which must be converted to a termination for convenience. We are without authority to grant Appellant’s request to reinstate the contract and the damages are limited to the specified indemnity following a conversion to a termination for convenience. E.g., Stanley Myrie, PSBCA No. 1674, 88-1 BCA ¶ 20,239 (and cases cited therein).

The appeal is sustained.

James E. Lemert

Administrative Judge

Board Member

I concur:

James A. Cohen

Administrative Judge

Chairman

I concur:

James D. Finn, Jr.

Administrative Judge

Vice Chairman